CIBC

Documents
(SEDAR filing: 14 January 2014) Pricing Supplement No. 24 for CIBC Alerian MLP Infrastructure Index-Linked Notes, Series 17 (805 K). Blakes/McCarthy
Summaries
Summary Under
Tax Topics - Public Transactions - Offerings - Linked Notes - ROC Notes - Variable ROC Notes
ROC note offering of CIBC tied to Alerian MLP
Terms

ROC distributions based on Index yield. Approximately $96.50 of a Note will be the starting value of the "Notional Portfolio Value," which will track Alerian MLP Infrastructure Index (the "Reference Index"), which is comprised of 25 U.S. energy infrastructure master limited partnerships. The Notional Portfolio Value will be recalculated at the end of each quarter as described below based inter alia on the Index performance. The purchaser of a Cdn.$100 note is entitled, each quarter other than the final quarter, to receive a return of principal (a "Partial Principal Repayment") equal to the Notional Portfolio Value in U.S. dollars at the previous quarter end multiplied by the difference between the total return and the price return for the Index for the quarter, provided that the total of such repayments shall not exceed $99 (with any excess amounts being factored into the Notional Portfolio Value).

FX hedging/Notional Portfolio Value computation

In order to compute the Notional Portfolio Value and hedge each quarter's starting value, such value

  • will be converted into U.S. dollars at the exchange rate at the beginning of the quarter,
  • that amount will be multiplied by the total return of the Index for the quarter (i.e., including notional MLP distributions),
  • the resulting amount will be reduced by the quarter's "USD Funding Amount" reflecting notional interest of US LIBOR (as at the quarter beginning) plus a spread of up to 1.50%,
  • the resulting amount will be converted back into Canadian dollars at the quarter end using the current exchange rate,
  • the resulting amount will be increased by the quarter's "CAD Investment Amount" reflecting notional interest at the Canadian dollar banker's acceptance rate as at the quarter beginning, and
  • the resulting amount will be reduced by the current quarter's Partial Principal Repayment and by a "Maintenance Amount" of 1.5%.
Maturity

On the Maturity Date of around February 20, 2019, the holder will receive the remaining principal amount plus the Variable Return (being the positive or negative difference between the final Notional Portfolio Value and the remaining principal amount.)

Canadian taxation

The Partial Principal Repayments "should not be included in the Investor's income when received but rather, should reduce the Investor's adjusted cost base of the Notes." The Variable Amount (if positive) will be included in income when it becomes calculable (implicitly, in the year of maturity unless there is an early termination event based on market disruption), and will be realized as a capital loss (if the Notes are capital property to the holder) if it is negative. Appreciation in the Note value over its amortized principal amount should be realized as a capital gain if there is a sale by such a holder before maturity, although "the matter is not free from doubt." Notes are not derivative forward agreements, and are not prohibited investment under Reg. 8514(1) for a registered pension plan.

US taxation

An investor in Notes, unlike an investor in the MLPs, would not be required to file US federal tax returns. Discussion of MLP rules.